Search This Blog

Sunday, June 5, 2011

Jobs or deficits? The answer is obvious but not to politicians

For those who want a rational insight into matters economic, I heartily recommend Jared Bernstein's blog.

He was one of the most liberal and rational parts of Obama's economic team. With too many Geitners on the team his was a relatively lonely voice and he left the administration earlier this year. Pity.

Here's an example of his common sense last week:

Someone just asked me, “how does the White House pivot from targeting deficits to targeting jobs?”

How’s this? “Based on new information, we are now pivoting from targeting deficits to targeting jobs!”

Except that deficit hysteria is so pervasive nothing serious will be done. Sure, the Republicans have their jobs plan which is the same old same old that worked so well for President Hoover. Cut government spending, deregulate everything and hand out even more tax breaks to the wealthy. This policy may increase demand for chauffeurs, maids, butlers and salespeople selling Bentlys, yachts and jewelry but little else.

Even during the somewhat impressive job growth numbers over the past few months, prior to that coming to a screeching halt in may, government at all levels shed jobs every single month. Those were relative well paying jobs and for each government job loss we a new, often lower paying service job created.

Bear in mind the Chinese have said they aren't concerned about short term deficits as long as there is progress in the 5-10 year window. Tax revenues, currently at a 60 year low relative to GDP, at 14.8% will have to increase to narrow the deficit. Even the Ryan "Path to prosperity assumes a tax revenue ratio of over 18% of GDP, something that can only happen in the magic dust fairyland of the Ryan plan where even more tax cuts for the people making real money are contemplated.

We cannot seriously reduce the deficit with cost cutting only as long as sacred cows like Defense are left untouched. Repeal of the top level of the Bush tax cuts and tightening of large corporate tax loopholes is essential.

last week Bernstein wrote about America's infrastructure. In 2009 the American Society of Civil Engineers graded 15 areas of America's infrastructure. Of the 15 4 were awarded a C or C-. The other 11 got D's or D minuses. The cost to upgrade them in a 5 year time frame is $2.2 trillion. America needs a new "New Deal" and that expenditure would fit the bill. Yes, it will increase he deficit in the short term but the stimulus to the economy would he huge. Each year wasted in not dealing with infrastructure makes the situation worse and only increases the costs down the road.

When the Republicans expend far more energy trying to shut down planned parenthood and wage their war against abortion while occasionally paying homage to job creation with failed policies and platitudes nothing will get done. Obama and far too many of the Democrats have got caught up in deficit hysteria and do little other than to try to minimize Republican budget cuts so something as sensible as spending money on infrastructure will never enter the dialogue.

The economy is moribund because demand has withered, bot because of uncertainty about taxes or regulations. True seriousness about the economy left the building a long time ago and it isn't coming back. The only hope is that the current radical extreme version of the GOP truly gets its ass kicked in 2012 but that won't happen if the economy starts to worsen and there is nothing on the horizon to suggest that the opposite will happen.

No comments: